By Anthony Diosdi
When an individual is charged with most crimes, the focus of an investigation by law enforcement is typically directed to a limited historical event. Questions of where the defendant was on the night in question, what his or her relationship to the victim, whether he or she had any motive to commit the alleged crime can be pursued immediately by both the prosecution and the defense. Criminal tax cases are different. Most criminal investigations start with a defendant and seek a crime. The question is not whether the defendant did something wrong; it is whether the defendant did anything wrong. Any crime involving tax can result in criminal prosecution, whether it was committed yesterday or five years ago. As a result, criminal tax investigations can take years.
If after a criminal tax investigation is concluded a determination is made by the government to charge a defendant with one or more tax crimes, the defendant will have to go through an initial appearance and an arraignment in a federal court. This article discusses what a defendant can expect during an appearance and arraignment.
At the defendant’s first appearance, a defendant appears before a federal magistrate. This magistrate will preside over the appearances, but the case will ultimately be referred to a federal district court judge. When a defendant first appears before a magistrate, he or she is informed of certain constitutional rights, such as the right to remain silent. The initial appearance is not a trial. However, the preliminary hearing is an opportunity for the prosecution to present evidence to the judge to show that there is probable cause to believe that the defendant committed one or more crimes. In a criminal tax case, this usually involves presenting evidence that there is probable cause to establish that the defendant failed to report all his or her taxable income on a tax return or tax returns. It can also involve the presentation of evidence that there is probable cause to establish that a defendant filed one or more false tax returns with the Internal Revenue Service (“IRS”).
The defendant is then asked if he or she can afford counsel. If a defendant cannot afford to hire counsel, he or she is instructed to fill out a financial affidavit. The affidavit is then submitted to the magistrate, and, if the defendant qualifies, a public defender or Criminal Justice Act Panel (“CJA”) panel counsel is appointed.
Once the defendant has counsel, the magistrate informs the defendant of the charges and the statutory maximum sentence. The “statutory maximum” is the most prison time that a defendant can receive for each alleged violation of federal law. If the prosecution believes the defendant is a danger or a flight risk, the prosecutor will move for detention at the initial appearance. Most defendants charged with a tax crime are not deemed dangerous or a flight risk and are not taken into custody at the initial appearance. In most cases, the prosecutor and defense attorney are generally able to agree on a set of proposed conditions to avoid the detention of a defendant at the initial appearance. In cases where the prosecution is seeking detention, a magistrate must decide whether or not there are conditions of bond to reasonably assure the defendant is not a flight risk and is not a danger to the community. The court can require an “unsecured” bond, which means that the defendant is making a legally enforceable written promise to pay the bond if the defendant knowingly fails to appear at a future proceeding. The court can also require a “secured” bond. A “secured” bond does not require that the defendant actually deposit with the court ahead of time or post other collateral worth the amount of the bond. The court can also require a secured bond, which requires the posting of the bond or collateral with the court before release can occur.
At the initial appearance, the defendant will also be informed of the next steps in the criminal process, including the scheduling of an arraignment. The arraignment is the formal reading of the charges against the defendant and the opportunity for the defendant to enter a plea of guilty or not guilty.
Anthony Diosdi is one of several tax attorneys and international tax attorneys at Diosdi Ching & Liu, LLP. Anthony Diosdi focuses a part of his practice on criminal tax enforcement, broad-based civil tax compliance and white collar matters generally. He also advises clients on the IRS voluntary disclosure program, with particular focus on disclosure related to offshore banking accounts.
Anthony Diosdi is a frequent speaker at international tax seminars. Anthony Diosdi is admitted to the California and Florida bars.
Diosdi Ching & Liu, LLP has offices in San Francisco, California, Pleasanton, California and Fort Lauderdale, Florida. Anthony Diosdi advises throughout the United States. Anthony Diosdi may be reached at (415) 318-3990 or by email: adiosdi@sftaxcounsel.com.
This article is not legal or tax advice. If you are in need of legal or tax advice, you should immediately consult a licensed attorney.